Hey All,
After going through the detailed post from 
The image above is taken from my X feed; post from Brain Feroldi. It has all the formulas related to the Time Value of Money, we won’t be diving into that level of complexity here as promised. And hence will be looking into some basic to understand what - Time Value of Money is all about. TIME VALUE OF MONEY aka TVM in simple terms means money today is more valuable than the same money in the future. Some of you may question WHY? Well the money today if invested today will yeild interest and whereas the same money in future loses value due to inflation. Lets us now try to understand the same concept with the help of an example::
Lets as say we gave $1,000 dollars today to one PersonX and the same amount given to another PersonB after one year.
PersonX invested $1K at 10% - this becomes $1100 after a year and this amount becomes the future value & Whereas the
PersonB gets $1K after a year - this is worth less than $1K today (Present Value)
So you guys see the difference here? Even though the amount is the same, money received earlier grows in value over time. Hence we can say that earlier money is more valuable than later money and this is called the Time Value of Money. So we can say that::
Earlier Money = More Power
More Time = More growth & hence
Regular Saving like SIPs [Systematic Investment Plan] & FDs [Fixed Deposits] beats late lum sum savings
There is also this Rule of 72 that I would like to talk about as it has more to do with more time and more growth. First the rule of 72 formula which is as follow::
72 ÷ Interest Rate = Years to Double Money
Now considering our example of $1K it would take 7.2 Years to double the money. Here it is how::
Example: 10% return → 72 ÷ 10 = 7.2 years
Drawing the conclusion here time is our biggest asset when it comes to money. With time in hand adjustments can be made so as to improve outcomes and make better financial decisions. No time means the risk is higher, and higher risk increases the chances of poor outcomes and at times hefty losses. So the jest of it is that earlier one start saving or investing, the more money they can have/multiply through the power of compounding. Well this should be it for todays post on - "Time Value of MONEY - In SIMPLE Terms..." Happy Investing & Start Early for more Gains.... Cheers
Image Courtesy:: Brain Feroldi
Best Regards
Paras
PS:- None of the above is a FINANCIAL Advice. Please DYOR; Do your own research. I have a personal interest in blockchain, stocks, and cryptocurrencies and actively invest in emerging projects.
